TiVo Ad Search Blow to Broadcasters, Targets New Deals, Analysts Say
TiVo’s planned offering of searchable video advertising is another blow to broadcasters’ conventional spot commercial revenue over the long term, analysts said. In the short term, it may pave the way for content and TV distribution deals similar to one earlier this year with Comcast. The service is supposed to start this spring. It will let users search by keyword or category among ads downloaded to devices based on profiles they've created. That functionality won’t help TiVo win favor with broadcasters already flustered by its strategy, analysts said. It may boost the unprofitable company’s prospects to add more partners after its biggest customer decided to scale back marketing the PVR (CD Aug 25 p8), said 2 analysts who are former cable executives.
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The latest in a string of product announcements from TiVo came Mon., as video ads are moving away from the broadcast mass markets toward customization and anytime availability, said Jack Myers, editor of Jack Myers Media Business Report, and TNS Media Intelligence’s Jon Swallen. “Everything is moving to an on-demand world, and it’s natural advertising is going to do it as well,” said Myers. TiVo’s search product is among many that are chipping away at traditional broadcast advertising, said Myers. Broadcasters may look at this as “just one more piece of stone falling off the facade,” said one analyst.
Broadcasters we asked to discuss TiVo were mum on the latest enhancement. Officials from ABC and Fox declined to comment. In bringing Web-style search to ads viewed on TV, TiVo will compete most directly with broadband video advertising, Swallen said -- but it can’t be good news to broadcasters. Advertisers will probably create long-form messages, like infomercials and mini-movies, to satisfy consumers’ information and entertainment demands and make the pieces worth seeking out, said analysts. It will take broadcasters a few years to feel any pinch, as the next 3- 5 years will feel like “business as usual,” said Myers. Instead of being lulled into sticking with old business models, broadcasters must start coming up with new kinds of sponsorship and marketing partnerships, he said. If broadcasters are, say, 95% dependent on old-fashioned spot advertising now, they could find that dropping to perhaps 40% in 10 years, Myers said.
TiVo’s limited customer base may offset the negative potential for broadcasters, said other analysts. Only 1.5 million of the 4.1 million customers that analyst Fred Moran expects TiVo to have by Jan. 31 will directly subscribe to its service. All other customers will come from companies including Comcast and Rupert Murdoch’s DirecTV, which has largely stopped marketing TiVo in favor of a PVR made by another firm also part-owned by Murdoch, Moran wrote in an investor note last week. “I think a broadcaster is probably going to look at [TiVo searches] for what it is, which is probably a neutral,” said researcher Bruce Leichtman. “Of their 1 million standalone subscribers that they have today, we don’t know how many actually use TiVoToGo, we don’t know how many will use this advertising search capability,” said Hoefer & Arnett analyst April Horace. TiVoToGo will let subscribers easily transfer recorded TV shows to Apple iPods (CD Nov 22 p7).
‘Not a Message to Consumers’
With consumer demand for ad searching lukewarm, TiVo’s latest move may be aimed at potential partners, said some analysts. “There are not a lot of consumers out there who are going to look for ads,” said Leichtman, ex- mktg. dir. of Continental Cablevision: “I don’t think it’s something that consumers are exactly going to flock to.” Search capabilities are “more an appeasement to potential partners… I think it’s more from a partnership standpoint,” he said: “It is a message to partners,” such as Comcast: “It is not a message to consumers.”
TiVo’s recent product deals, while helping maintain its public image, haven’t helped clarify how new CEO Tom Rogers will deliver on ambitious growth plans, said some analysts. “Where it remains to be seen is whether any of these initiatives will have a return on investment or top line growth,” said Horace, former TCI vp-business affairs. She recommends investors sell shares of TiVo, which has said it expects to report a loss of as much as $25 million late today (Tues.). “Who ultimately will benefit from those technologies from a business standpoint remains to be seen,” she said.
TiVo search poses technological questions that won’t be answered for a while, Swallen said: Will it offer ads relevant to viewers’ immediate buying intentions or only to more general interests as consumers? How well will advertisers address the interests of consumers partway between the traditional couch potato and the more active and probing online shopper? How big is that intermediate group and how much of the user control and the more objective information sources available on the Internet will they trade off for the convenience of the TiVo system?
The impact is confined to TiVo’s universe of customers -- if no patents or proprietary technologies would block other service providers from knocking off the offering -- and to product categories that consumers will take the trouble to search for, Swallen said. It won’t hurt broadcast revenue from “Crest toothpaste,” but it could hurt on cars and travel, he said.